Wednesday, December 19, 2007

David Byrne's Survival Strategies for Emerging Artists — and Megastars

By David Byrne

David Byrne.

Full disclosure: I used to own a record label. That label, Luaka Bop, still exists, though I'm no longer involved in running it. My last record came out through Nonesuch, a subsidiary of the Warner Music Group empire. I have also released music through indie labels like Thrill Jockey, and I have pressed up CDs and sold them on tour. I tour every few years, and I don't see it as simply a loss leader for CD sales. So I have seen this business from both sides. I've made money, and I've been ripped off. I've had creative freedom, and I've been pressured to make hits. I have dealt with diva behavior from crazy musicians, and I have seen genius records by wonderful artists get completely ignored. I love music. I always will. It saved my life, and I bet I'm not the only one who can say that.

What is called the music business today, however, is not the business of producing music. At some point it became the business of selling CDs in plastic cases, and that business will soon be over. But that's not bad news for music, and it's certainly not bad news for musicians. Indeed, with all the ways to reach an audience, there have never been more opportunities for artists.

Where are things going? Well, some people's charts look like this:

Some see this picture as a dire trend. The fact that Radiohead debuted its latest album online and Madonna defected from Warner Bros. to Live Nation, a concert promoter, is held to signal the end of the music business as we know it. Actually, these are just two examples of how musicians are increasingly able to work outside of the traditional label relationship. There is no one single way of doing business these days. There are, in fact, six viable models by my count. That variety is good for artists; it gives them more ways to get paid and make a living. And it's good for audiences, too, who will have more — and more interesting — music to listen to. Let's step back and get some perspective.

What is music?

First, a definition of terms. What is it we're talking about here? What exactly is being bought and sold? In the past, music was something you heard and experienced — it was as much a social event as a purely musical one. Before recording technology existed, you could not separate music from its social context. Epic songs and ballads, troubadours, courtly entertainments, church music, shamanic chants, pub sing-alongs, ceremonial music, military music, dance music — it was pretty much all tied to specific social functions. It was communal and often utilitarian. You couldn't take it home, copy it, sell it as a commodity (except as sheet music, but that's not music), or even hear it again. Music was an experience, intimately married to your life. You could pay to hear music, but after you did, it was over, gone — a memory.

Technology changed all that in the 20th century. Music — or its recorded artifact, at least — became a product, a thing that could be bought, sold, traded, and replayed endlessly in any context. This upended the economics of music, but our human instincts remained intact. I spend plenty of time with buds in my ears listening to recorded music, but I still get out to stand in a crowd with an audience. I sing to myself, and, yes, I play an instrument (not always well).

We'll always want to use music as part of our social fabric: to congregate at concerts and in bars, even if the sound sucks; to pass music from hand to hand (or via the Internet) as a form of social currency; to build temples where only "our kind of people" can hear music (opera houses and symphony halls); to want to know more about our favorite bards — their love lives, their clothes, their political beliefs. This betrays an eternal urge to have a larger context beyond a piece of plastic. One might say this urge is part of our genetic makeup.

All this is what we talk about when we talk about music.

All of it.

What do record companies do?Or, more precisely, what did they do?

Fund recording sessions

Manufacture product

Distribute product

Market product

Loan and advance money for expenses (tours, videos, hair and makeup)

Advise and guide artists on their careers and recordings

Handle the accounting

This was the system that evolved over the past century to market the product, which is to say the container — vinyl, tape, or disc — that carried the music. (Calling the product music is like selling a shopping cart and calling it groceries.) But many things have changed in the past decade that reduce the value of these services to artists.

For example:

Recording costs have declined to almost zero. Artists used to need the labels to bankroll their recordings. Most simply didn't have the $15,000 (minimum) necessary to rent a professional studio and pay an engineer and a producer. For many artists — maybe even most — this is no longer the case. Now an album can be made on the same laptop you use to check email.

Manufacturing and distribution costs are approaching zero. There used to be a break-even point below which it was impractical to distribute a recording. With LPs and CDs, there were base manufacturing costs, printing costs, shipping, and so on. It paid — in fact, it was essential — to sell in volume, because that's how many of those costs got amortized. No more: Digital distribution is pretty much free. It's no cheaper per unit to distribute a million copies than a hundred.

Touring is not just promotion. Live performances used to be seen as essentially a way to publicize a new release — a means to an end, not an end in itself. Bands would go into debt in order to tour, anticipating that they'd recover their losses later through increased record sales. This, to be blunt, is all wrong. It's backward. Performing is a thing in itself, a distinct skill, different from making recordings. And for those who can do it, it's a way to make a living.

So with all these changes, what happens to the labels? Some will survive. Nonesuch, where I've done several albums, has thrived under Warner Music Group ownership by operating with a lean staff of 12 and staying focused on talent. "Artists like Wilco, Philip Glass, k.d. lang, and others have sold more here than when they were at so-called major labels," Bob Hurwitz, president of Nonesuch, told me, "even during a time of decline."

David Byrne in Conversation with Brian Eno

"How the f--k can we get out of this?"

"Cool Tools"

"The people who know how to do this are the ones you fired ..."

"When was the last time you had dealings with a record company?"

But some labels will disappear, as the roles they used to play get chopped up and delivered by more thrifty services. In a recent conversation I had with Brian Eno (who is producing the next Coldplay album and writing with U2), he was enthusiastic about I Think Music — an online network of indie bands, fans, and stores — and pessimistic about the future of traditional labels. "Structurally, they're much too large," Eno said. "And they're entirely on the defensive now. The only idea they have is that they can give you a big advance — which is still attractive to a lot of young bands just starting out. But that's all they represent now: capital."

So where do artists fit into this changing landscape? We find new options, new models.

The six possibilities

Where there was one, now there are six: Six possible music distribution models, ranging from one in which the artist is pretty much hands-off to one where the artist does nearly everything. Not surprisingly, the more involved the artist is, the more he or she can often make per unit sold. The totally DIY model is certainly not for everyone — but that's the point. Now there's choice.

1. At one end of the scale is the 360, or equity, deal, where every aspect of the artist's career is handled by producers, promoters, marketing people, and managers. The idea is that you can achieve wide saturation and sales, boosted by a hardworking machine that stands to benefit from everything you do. The artist becomes a brand, owned and operated by the label, and in theory this gives the company a long-term perspective and interest in nurturing that artist's career.

Pussycat Dolls, Korn, and Robbie Williams have made arrangements like this, selling equity in everything they touch. The T-shirts, the records, the concerts, the videos, the BBQ sauce. The artist often gets a lot of money up front. But I doubt that creative decisions will be left in the artist's hands. As a general rule, as the cash comes in, creative control goes out. The equity partner simply has too much at stake.

This is the kind of deal Madonna just made with Live Nation. For a reported $120 million, the company — which until now has mainly produced and promoted concerts — will get a piece of both her concert revenue and her music sales. I, for one, would not want to be beholden to Live Nation — a spinoff of Clear Channel, the radio conglomerate that turned the US airwaves into pabulum. But Madge is a smart cookie; she's always been adept at controlling her own stuff, so we'll see.

2. Next is what I'll call the standard distribution deal. This is more or less what I lived with for many years as a member of the Talking Heads. The record company bankrolls the recording and handles the manufacturing, distribution, press, and promotion. The artist gets a royalty percentage after all those other costs are repaid. The label, in this scenario, owns the copyright to the recording. Forever.

There's another catch with this kind of arrangement: The typical pop star often lives in debt to their record company and a host of other entities, and if they hit a dry spell they can go broke. Michael Jackson, MC Hammer, TLC — the danger of debt and overextension is an old story.

Obviously, the cost of these services, along with the record company's overhead, accounts for a big part of CD prices. You, the buyer, are paying for all those trucks, those CD plants, those warehouses, and all that plastic. Theoretically, as many of these costs go away, they should no longer be charged to the consumer — or the artist.

Sure, many of the services traditionally provided by record labels under the standard deal are now being farmed out. Press and publicity, digital marketing, graphic design — all are often handled by smaller, independent firms. But he who pays the piper calls the tune. If the record company pays the subcontractors, then the record company ultimately decides who or what has priority. If they "don't hear a single," they can tell you your record isn't coming out.

So what happens when online sales eliminate many of these expenses? Look at iTunes: $10 for a "CD" download reflects the cost savings of digital distribution, which seems fair — at first. It's certainly better for consumers. But after Apple takes its 30 percent, the royalty percentage is applied and the artist — surprise! — is no better off.

Not coincidentally, the issues here are similar to those in the recent Hollywood writers' strike. Will recording artists band together and go on strike?

3. The license deal is similar to the standard deal, except in this case the artist retains the copyrights and ownership of the master recording. The right to exploit that property is granted to a label for a limited period of time — usually seven years. After that, the rights to license to TV shows, commercials, and the like revert to the artist. If the members of the Talking Heads held the master rights to our catalog today, we'd earn twice as much in licensing as we do now — and that's where artists like me derive much of our income. If a band has made a record itself and doesn't need creative or financial help, this model is worth looking at. It allows for a little more creative freedom, since you get less interference from the guys in the big suits. The flip side is that because the label doesn't own the master, it may invest less in making the release a success.

David Byrne in conversation with Mac McCaughan from Merge Records.

"How could an indie label handle a release the size of Arcade Fire's second record?"

"How do emerging acts survive?"

"Major labels aren't doing well because they put out terrible records for years and years and kept raising the price of those terrible records and finally people were like, 'Screw you.'"

But with the right label, the license deal can be a great way to go. This is the relationship Arcade Fire has with Merge Records, an indie label that's done great for its band by avoiding the big-spending, big-label approach. "Part of it is just being realistic and not putting yourself in the hole," Merge cofounder Mac McCaughan says. "The bands we work with, we never recommend that they make videos. I like videos, but they don't sell a lot of records. What really sells records is touring — and artists can actually make money on the tour itself if they keep their budgets down."

4. Then there's the profit-sharing deal. I did something like this with my album Lead Us Not Into Temptation in 2003. I got a minimal advance from the label, Thrill Jockey, since the recording costs were covered by a movie soundtrack budget, and we shared the profits from day one. I retained ownership of the master. Thrill Jockey does some marketing and press. I may or may not have sold as many records as I would have with a larger company, but in the end I took home a greater share of each unit sold.

5. In the manufacturing and distribution deal, the artist does everything except, well, manufacture and distribute the product. Often the companies that do these kinds of deals also offer other services, like marketing. But given the numbers, they don't stand to make as much, so their incentive here is limited. Big record labels traditionally don't make M&D deals.

David Byrne in conversation with Michael Hausman.

"We weren't competing with Madonna, Beyonce or Springsteen, because they weren't doing it."

"There's a way for music to have a life of its own and turn into something bigger ..."

"The labels aren't set up for enlightened, long-range thinking. That's what a good manager should be doing."

In this scenario, the artist gets absolute creative control, but it's a bigger gamble. Aimee Mann does this, and it works really well for her. "A lot of artists don't realize how much more money they could make by retaining ownership and licensing directly," Mann's manager, Michael Hausman, told me. "If it's done properly, you get paid quickly, and you get paid again and again. That's a great source of income."

6. Finally, at the far end of the scale, is the self-distribution model, where the music is self-produced, self-written, self-played, and self-marketed. CDs are sold at gigs and through a Web site. Promotion is a MySpace page. The band buys or leases a server to handle download sales. Within the limits of what they can afford, the artists have complete creative control. In practice, especially for emerging artists, that can mean freedom without resources — a pretty abstract sort of independence. For those who plan to take their material on the road and play it live, the financial constraints cut even deeper. Backup orchestras, massive video screens and sets, and weird high tech lights don't come cheap.

"You've had years of experience with the press ... missing the point."

"It actually physically blew up and we had to replace it ..."

"It's just an art band from Oxford having a bit of a laugh."

"Johnny’s doing his gay boy sort of pretty look"

Radiohead adopted this DIY model to sell In Rainbows online — and then went a step further by letting fans name their own price for the download. They weren't the first to do this — Issa (formerly known as Jane Siberry) pioneered the pay-what-you-will model a few years ago — but Radiohead's move was much higher profile. It may be less risky for them, but it's a clear sign of real changes afoot. As one of Radiohead's managers, Bryce Edge, told me, "The industry reacted like the end was nigh. They've devalued music, giving it away for nothing.' Which wasn't true: We asked people to value it, which is very different semantics to me."

At this end of the spectrum, the artist stands to receive the largest percentage of income from sales per unit — sales of anything. A larger percentage of fewer sales, most likely, but not always. Artists doing it for themselves can actually make more money than the massive pop star, even though the sales numbers may seem minuscule by comparison. Of course, not everyone is as smart as those nerdy Radiohead boys. Pete Doherty probably should not be handed the steering wheel.

Freedom versus pragmatism

These models are not absolute. They can morph and evolve. Hausman and Mann took the total DIY route at first, getting money orders and sending out CDs in Express Mail envelopes; later on they licensed the records to distributors. And things change over time. In the future, we will see more artists take up these various models or mix and match versions of them. For existing and emerging artists — who read about the music business going down the drain — this is actually a great time, full of options and possibilities. The future of music as a career is wide open.

Many who take the cash up front will never know that long-range thinking might have been wiser. Mega pop artists will still need that mighty push and marketing effort for a new release that only traditional record companies can provide. For others, what we now call a record label could be replaced by a small company that funnels income and invoices from the various entities and keeps the accounts in order. A consortium of midlevel artists could make this model work. United Musicians, the company that Hausman founded, is one such example.

I would personally advise artists to hold on to their publishing rights (well, as much of them as they can). Publishing royalties are how you get paid if someone covers, samples, or licenses your song for a movie or commercial. This, for a songwriter, is your pension plan.

Increasingly, it's possible for artists to hold on to the copyrights for their recordings as well. This guarantees them another lucrative piece of the licensing pie and also gives them the right to exploit their work in mediums to be invented in the future — musical brain implants and the like.

No single model will work for everyone. There's room for all of us. Some artists are the Coke and Pepsi of music, while others are the fine wine — or the funky home-brewed moonshine. And that's fine. I like Rihanna's "Umbrella" and Christina Aguilera's "Ain't No Other Man." Sometimes a corporate soft drink is what you want — just not at the expense of the other thing. In the recent past, it often seemed like all or nothing, but maybe now we won't be forced to choose.

Ultimately, all these scenarios have to satisfy the same human urges: What do we need music to do? How do we visit the land in our head and the place in our heart that music takes us to? Can I get a round-trip ticket?

Really, isn't that what we want to buy, sell, trade, or download?

David Byrne is currently collaborating with Fatboy Slim and Brian Eno. Separately.